investment dynamics in the global dairy industry and the ... · pdf fileinvestment dynamics in...

Investment dynamics in the global dairy industry and the contribution of co-operatives

The Agropur Dairy Cooperatives Forum Quebec, October 8th 2014

CNIEL - Benoît Rouyer October 2014

Introduction

2

Investments are assessed according to medium and long term outlooks …

which can clearly differ from short term prospects

CNIEL - Benoît Rouyer October 2014 3

The middle class is soaring in emerging countries.

OECD

Size of the global middle class

Middle class: all people living in households with a daily per capita income of between 10 and 100 USD in terms of PPP

0

1

2

3

4

5

2009 2020 2030

Africa & Middle EastAsia PacificCentral & South AmericaEuropeNorth America

Billion people

28%

54%

66%

36% 22% 14%

18% 10% 7%

10% 8% 6%

8%

7%

7%

4.9 Billion

3.2 Billion

1.8 Billion

Let’s remind ourselves of a few structural factors impacting our future world vision


Many zones (notably among emerging countries) face growing scarcity of resources (water, arable land, etc.).

FAO 2011 – The state of the World’s land and water resources for food and agriculture

Global distribution of physical water scarcity



LTO

Milk prices in the main three exporting areas have been converging over the last few years.

25

30

35

40

45

50

55

2007 2008 2009 2010 2011 2012 2013

New Zealand

Western Europe

United States

USD / 100 kg



IDF

Milk prices have been steadily growing in emerging countries over the last few years.

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013

China

EU

Brazil

USD / 100 kg


CNIEL - Benoît Rouyer October 2014

Investment strategies differ greatly according to area

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CNIEL / FAO

Trade surplus (positive balance > 2% production)

Trade deficit (negative balance < 2% production)

Trade balanced

Classification of countries according to their trade balance for dairy products

Countries with trade surplus ≈ temperate industrialized

countries

Saturated domestic market (apart from a few exceptions : United

States, Australia, etc.)

Strong export outlook (unless resource problems)

Countries with trade deficit ≈ emerging countries

Dynamic domestic market

Growing imports in most cases

Leading global dairy processors in 2013: 26 groups (including 10 co-ops) generating dairy sales exceeding 3 billion USD

(A) Infant formula excluded(B) Perimeter of ice cream and dairy activities was redefined in 2013(C) Fiscal year ending in July 2013(D) All activities included(E) Fiscal year ending in March 2014(F) EstimateNB: Kerry, Unilever, PepsiCo & Mondelez not ranked

8CNIEL - Benoît Rouyer October 2014

AmericaDFA (US) 12,8Dean Foods (US) (D) 9,0Saputo (CA) (E) 8,8 Schreiber (US) (F) 4,5Land O’Lakes (US) 4,5Kraft Foods (US) 3,9Agropur (CA) 3,7Lala (MX) 3,2

AsiaYili (CN) 7,8Mengniu (CN) 7,1Meiji Dairies (JP) (E) 6,4Morinaga (JP) (D) 6,0

EuropeLactalis (FR) 21,2 Bongrain (FR) 5,8Nestlé (CH) (A) (B) 18,7 Müller (DE) (F) 4,9Danone (FR) (A) 15,7 Glanbia plc (IE) 4,4Friesland Campina (NL) 15,1 Bel (FR) 3,6Arla Foods (DK-SE) 13,1 Emmi (CH) 3,6DMK (DE) 7,1 Tine (NO) 3,4Sodiaal (FR) 6,1

OceaniaFonterra (NZ) (C) 15,1

Co-opsPrivate companies

Leading co-op groups have been experiencing steady growth over the last few years – The example of North America


Dairy turnover development (Billion USD)

6

8

10

12

14

07 08 09 10 11 12 13

11,111,7

8,1

9,8

13,012,1

12,8Billion USD

DFA

1

2

3

4

5

6

07 08 09 10 11 12 13

4,2 4,1

3,2 3,5

4,3 4,24,5

Billion USD

Land O Lakes

1

2

3

4

5

07 08 09 10 11 12 13

2,32,7 2,7

3,23,7 3,7 3,7

Billion USD

Agropur

CNIEL / annual reports, international press


Leading co-op groups have been experiencing steady growth over the last few years – The example of Asia and Oceania

0

1

2

3

4

08 09 10 11 12 13 14

1,3 1,51,7

2,12,4 2,5

3,0

Billion USD

Amul

NB: Fiscal year ending in March for Amul, in June for Murray Goulburn and July for FonterraCNIEL / annual report, international press

0

1

2

3

07 08 09 10 11 12 13

1,7

2,4

1,82,0

2,32,4 2,4

Billion USD

Murray Goulburn

8

10

12

14

16

18

07 08 09 10 11 12 13

9,4

15,0

9,6

11,9

15,3 15,815,1

Billion USD

Fonterra

14 months



Leading co-op groups have been experiencing steady growth over the last few years – The example of Europe

CNIEL / annual report, international press

6

8

10

12

14

16

07 08 09 10 11 12 13

7,0

13,9

11,4 11,9

13,4 13,2

15,1Billion USD

FrieslandCampinaFriesland

Foods

6

8

10

12

14

07 08 09 10 11 12 13

8,89,8

8,7 8,7

10,310,9

13,1

Billion USD

Arla Foods

0

2

4

6

8

07 08 09 10 11 12 13

3,23,7

2,6 2,8

6,35,7

7,0

Billion USD

DMKNordmilch

0

2

4

6

8

07 08 09 10 11 12 13

3,14,0

3,5 3,5

6,25,6

6,1

Billion USD

Sodiaal


Dairy co-ops have based their growth on two main means.


• Industrial investments in the heart of their homeland

• Strengthening their international activities

Co-ops invest to satisfy their shareholders’ will to grow – The example of Fonterra


Total (except Edendale): 1.1 billion USD

Dry products: 870 M USDCheese: 130 M USD

UHT milk: 100 M USD

Investments announced or finalized by Fonterra in New Zealand since 2012

Clandeboye: mozzarella (60 M USD)

Te Rapa: cream cheese (24 M USD)

Whareroa: cheese storage (19 M USD)dry product distribution center (25 M USD)

Darfield: milk drier n°1 15 t / h (162 M USD)milk drier n°2 30 t / h (243 M USD)

Pahiatua: milk powder (193 M USD)

Waitoa: UHT milk (98 M USD)

Eltham: sliced cheese (26 M USD)

CNIEL / international press

Lichfield: milk powder (246 M USD)

Edendale: MPC, AMF (not available but significant)


Investments announced or finalized by Murray Goulburn since 2012

West Sydney (New South Wales)Fresh milk / new plant (58 M USD)

Cobram (Victoria)Cheese cutting and

packaging (72 M USD)

Cobram and Koroit (Victoria)Ingredients (37 M USD)

Melbourne (Victoria) Fresh milk (77 M USD)

Kiewa (Victoria) Cream cheese (4 M USD) Leongatha (Victoria) UHT milk (18 M USD)

Edith Creek (Tasmania) Dairy Beverage (14 M USD) CNIEL / international press

Total: 280 million USD

Dry products: 37 M USDCheese: 76 M USDMilk: 167 M USD

Co-ops invest to satisfy their shareholders’ will to grow– The example of Murray Goulburn


A two-year investment program

of around 700 million USD was

announced in May 2014 to build

11 new factories

5 in Gujarat

3 in Haryana

2 in Uttar Pradesh

1 in Calcutta


Co-ops invest to satisfy their shareholders’ will to grow – The example of GCMMF

Some European dairy co-ops have based their growth around the implementation of very sizeable plants.


A few examples of European dairy plants with an annual capacity exceeding one billion litres of milk

Veghel (NL): a 75 million USD investment announced in 2012 to expand annual plant capacity from 1.2 to 1.9 billion litres of milk

Zeven (DE): a 90 million USD investment announced in 2013 to expand annual plant capacity from 0.9 to 1.3 billion litres of milk Edewecht (DE): 125 000 tonnes of cheese produced in 2012 plant processing capacity exceeding 1 billion litres of milk per year

Pronsfeld (DE): investment program aiming to increase annual capacity from 1.3 to 2.0 billion litres of milk between 2011 and 2014 Aylesbury (GB): late 2013 implementation of a new pasteurized milk packing plant with capacity exceeding 1 billion litres per year

Dringenburg (DE): processes more than one billion litres of milk to produce semi-hard cheeses


Some co-ops set up partnerships to build new plants – The example of 4 co-ops located in North Germany


4 dairy co-ops in North Germany

Meierei Barmstedt (Turnover: 425 million USD) Meierei Schmalfeld Hasenmoor (Turnover: 100-200 million USD) Meierei Wasbek (Turnover: 50 million USD) Uelzena (Turnover: 680 million USD)

An 85 million USD joint investment to build a new drier with an annual capacity of 570 million litres of skim milk

Implementation in spring 2014

20 km


18CNIEL - Benoît Rouyer Octobre 2014

Arla Foods and DMK have jointly invested 65 million USD to build a new ingredient factory.

Joint venture named ArNoCo

Located in Nordhackstedt, where DMK holds a sizeable cheese factory

Production of whey protein concentrates and dry blend lactose (25 000 t per year)

Begun production in August 2014

Some co-ops set up partnerships to build new plants – The example of dairy leaders DMK and Arla Foods

Some co-ops have set up partnerships with foreign investors to build new processing plants.


Chinese Synutra has invested 115 million USD in a 130 millionUSD project set up with French Sodiaal to build two driers inCarhaix (France). The opening is scheduled in 2015. The plantwill process 280 million litres of milk.

In 2013 Chinese Biostime provided 25 million USD out of the65 million USD invested jointly with Isigny Ste Mère in thebuilding of a new infant formula plant (30 000 t / y). Biostimehas taken a stake in the French co-op.



• Industrial investments in the heart of their homeland

• Strengthening their international activities

Dairy co-ops have based their growth on two main means.


Some co-ops generate a significant part of their industrial activities outside their homeland –The example of Agropur

is a Canadian co-op (3 455 Canadian shareholders in 2013)

endowed with two domestic markets (Canada & United States)

Agropur has recently achieved strong industrial growth in Canada and the United States

2013

1 merger with Farmers Co-operative Dairy4 acquisitions: Coast Mountain Dairy, Cook’s, M Larivée International and fromagerie Damafro

Acquisition of the dry blending business of Foremost FarmNotification of a expansion program to double plant activity at Hull (Iowa)


2014 (9 months)

1 merger with Dairytown2 acquisitions: dairy processing and food distribution businesses of Northumberland Dairy Cooperative (sales of 62 million USD / year); dairy business of Sobeys for 345 million USD

Acquisition in August of Davisco, which processed 1.7 billion litres of milk per year to produce 170 000 tonnes of cheeses and 80 000 tonnes of whey ingredients

Some co-ops generate a significant part of their industrial activities outside their homeland –The example of Agropur

Agropur has recently achieved strong industrial growth in Canada and the United States


0

5

10

15

01 02 03 04 05 06 07 08 09 10 11 12 13

Denmark

Sweden

Germany(2 500)

1 000 shareholder

Sweden(3 385)

Denmark(3 168)

UK (2 815)

Belgium(529)

Luxemburg(232)

Development of the number and location of Arla Foods shareholders


Some co-ops generate a significant part of their industrial activities outside their homeland –The example of Arla Foods


Arla Foods has internationalized its activities through several mergers

In 2011

GermanyTurnover (2011): 550 mln USD

660 mln kg of milk in 2010

Sweden230 mln kg of milk in 2010

merged with

Germany450 mln kg of milk in 2010,

but much lower in 2011

was bought by

In 2012

GermanyTurnover (2011): 965 mln USD

1.3 bln kg of milk in 2011

Great BritainTurnover (2011-12): 1 bln USD1.18 bln kg of milk in 2011-12

merged with


In 2014 merged with

BelgiumTurnover (2013 : 375 mln USD

795 farmers from BE (426), DE (317) and NL (52)


Dairy co-ops strengthen their position in areas with high development potential – A few examples in Latin America

Emmi purchased an Mexican cheese importerIn January 2014 Emmi took a 50% stake in specialtycheese importer Mexideli 2000.

Carbery invested to process whey inBrazilIn November 2012 Carbery set up a 50/50joint venture with Brasil Foods to build anew whey plant for 50 million USD.


Arla Foods took a stake in VigorIn September 2014 Arla Foods bought a8% stake in Vigor, a Brazilian companywith which it has been keeping up apartnership in whey processing since1986.


Arla Foods took a stake in Mengniu (China)In 2012 Arla Foods bought a 6% stake in Mengniu for 290million USD.

Fonterra investing in dairy farms (China)Fonterra established a 5 dairy farm hub in North Hebei, expected to produce 150 million litres ofmilk per year from late 2013 onwards.In July 2014, jointly with Abbott, Fonterra announced a 300 million USD investment to build 5new mega farms.

FrieslandCampina took control of Alaska (The Philippines)In 2012 Dutch FrieslandCampina invested450 million USD to increase its stake inAlaska from 8.1% to 97.7%.


Dairy co-ops strengthen their position in areas with high development potential – A few examples in Asia


FrieslandCampina purchased a dairy factory in the Ivory Coast In September 2014 FrieslandCampina bought adairy plant located in Abidjan from Olam for 19million USD.


Emmi, through its Kaiku subsidiary, took control of Vitalait (Tunisia) In 2012 Spanish Kaiku, subsidiary of Swiss group Emmi, purchased amajority stake into Vitalait (Turnover 2011: 90 million USD).

Dairy co-ops strengthen their position in areas with high development potential– A few examples in Africa


Thank you for your attention

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